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Pfizer Investors Mood Dampened by Second Quarter Earnings

Pharma major Pfizer ( PFE ) raised its earnings guidance for 2016 after the first quarter results, increasing their 2016 revenue expectation to be in the range of $51 billion to $53 billion - a full two billion higher than their previous projection of $49 billion to $51 billion. After terminating its plan for a $150 billion mega-merger with Allergan ( AGN ) earlier this year, Pfizer reported 11% revenue growth for the second quarter and 15% growth during the first half of this year compared to last year. These would seem to be solid numbers, but the stocks tell us a different story.

Revenue Performance

PfizerAAAs stock is down by 2.72% at the time of writing and it might continue in that direction as profits declined by 23% during the second quarter, despite the revenue beat. The pharma major blamed the sales decline of established products, higher production costs and charges for restructuring, acquisitions and litigation for its profit (net income) drop. PfizerAAAs standalone revenues, excluding Hospira (NYSE:HSP) operations, increased by $458 million, or 4% operationally, but the numbers did not excite investors.

AAAIn September, Pfizer bought Hospira Inc. in a$16 billion dealthat has made the company a leading player in the growing market for lower-priced versions of costly biotech drugs. Pfizer, like many of its peers, has faced a string of patent expirations over recent years as well as growing generic competition for former blockbusters like cholesterol fighter Lipitor and pain pill Celebrex.AAA

- WSJ

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The good news is that Pfizer left its guidance as it is during the second quarter earnings call and is still expecting revenues to come in at the $51 to $53 billion range, which means the company is not expecting a sales decline on any of its product lines.

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Segment Performance

In their established drugs business, Hospira rears its ugly head. Sales grew 16% when the Hospira acquisition was factored in. Excluding it, their revenues fell 6.1% - primarily driven by sales declines in Zyvox, Premarin and Lipitor.

On the consumer healthcare front, revenue grew by 5% for the quarter, while legacy established products declined 2%. LyricaAAAs numbers were up by 3%, reaching $1.261 billion, but Prevnar was down 16% to $1.258 billion from $1.503 billion in the year-ago quarter. Ibrance and Xalkori boosted their oncology franchise by 56%.

The Final Analysis

The results were mixed for PfizerAAAs drug portfolio, where some did really well and some disappointed. And with no information coming from management with respect to whether the company is planning to split in the future, the investment mood was damp.

Pfizer stock is trading at 14 times forward earnings and looks a bit cheap considering the amount of cash flow the company generates.

Overall, it was not a great quarter, but it a really was not a bad one either. However, the sharp drop in profits did its damage to investor sentiment, dragging the stock downwards.

Disclosure: I have no positions in any stocks mentioned and no plans to initiate

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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